TaxTMI 
TaxTMI 
TaxTMI 
2024 (12) TMI 265
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....ssessee purchased two apartments, i.e. A-1501 and A-1602 in Prateek Stylome, Sector 45, Noida, Uttar Pradesh, for sale consideration of Rs. 44,13,775/- and Rs. 42,39,275/- respectively. 3. On 31.07.2013, the assessee filed her return of income for the AY 2013-14, declaring her income as Rs. 7,37,560/-, comprising income of Rs. 41,565/- as Income from Business, and Rs. 7,05,996/- as Income from Other Sources. The assessee calculated her Income from Capital Gain at Rs. 77,21,957/-, after deducting Indexed Cost of Rs. 53,043/- from the total sale consideration of the Plot of Rs. 77,75,000/-. The assessee, however, claimed the said income as exempt under Section 54 of the Act, or in alternative, under Section 54F of the Act. 4. The case of the assessee was selected for scrutiny under Computer Assisted Scrutiny Selection (CASS) and a notice under Section 143 (2) of the Act was issued to her on 23.09.2014. Subsequently, a letter dated 04.09.2015 was issued by the learned Assessing Officer [hereafter 'the AO'] wherein it was stated that the sale deed of the Plot indicated that the Plot was a mere piece of land without any structure thereon and thus, the same was only a long term capital....
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....e Inspector submitted his report on 02.11.2015, inter alia, stating that the two flats were located on two different floors at two different ends in the same block/tower of the society. 8. After considering the material on record and the submissions made on behalf of the assessee, the AO passed an assessment order dated 18.01.2016 under Section 143 (3) of the Act and concluded that the two flats purchased by the assessee were not adjacent to each other so as to be converted into one unit. The AO also observed that by virtue of The Finance (No. 2) Act, 2014 [hereafter 'the Finance Act, 2014'], an amendment had been brought in Section 54F of the Act, whereby the words 'a residential house' had been replaced with 'one residential house', and thus, the legislature had clarified that the intention was always to allow exemption in respect of one residential house only. Therefore, the AO denied any benefit to the assessee under Section 54F of the Act since the assessee had purchased two flats i.e. two residential houses. The total income of the assessee was assessed at Rs. 84,59,520/- which included Income from Capital Gain at Rs. 77,21,957/-. 9. The assessee assailed the assessment ord....
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....ly located and cannot be converted into one residential house and therefore, same cannot be considered as one house for the purpose of allowability of deduction; and secondly, the construction of the tower was not completed within the period of 3 years. Ld. CIT(A) has denied the exemption U/S 54F even with respect to one flat also on the ground that construction of the tower has not been completed within the prescribed period of three years and assessee has not purchased one residential house but two, therefore, the entire exemption cannot be given. In the details order of the Ld. CIT(A), he has observed that earlier the phrase use in Section 54F was that assessee has purchased or has constructed "a residential house" and the amendment brought in the statue amending 'a residential house' to "one residential house" has been brought w.e.f 1st April, 2014, and therefore, such an amendment being clarificatory in nature has to be given retrospective effect. Catena of judgements including of High Courts and Tribunal which has been noted by the Ld. CIT(A) in the impugned order wherein the word 'residential house' has been interpreted to mean more than one residential house....
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....ion giving benefit to the assessee who has invested the Long Term Capital Gain for a purchase of residential house. The assessee has made the entire payment and flat has been in complete possession of the assessee and simply because certain finishing work has not been done it cannot be held that exemption u/s 54F should be denied. Accordingly, we hold that assessee is entitled for exemption of Section 54F on the higher amount invested in the flat amounting to Rs. 44,13,775/- and Assessing Officer is directed to allow exemption u/s 54F for this amount and the balance would be liable for taxation under Long Term Capital gain. 6. In the result, the appeal of the assessee is partly allowed." 12. The aforesaid findings of the learned ITAT have been assailed by the assessee in the present appeal. 13. On 31.01.2024, this Court framed the following question of law for consideration: "A. Whether the benefit as conferred by Section 54F of the Act and which uses the expression "a residential house" would stand confined to a singular unit or could it also be read as contemplating a plural interpretation?" SUBMISSIONS ON BEHALF OF THE PARTIES Submissions on Behalf of the Assessee 14. T....
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....venue 17. The learned counsel appearing for the Revenue contended that the assessee had purchased two different flats on two different floors, which were not adjacent or adjoining. It is stated that the requirement of Section 54F of the Act is of 'a residential house' which means one single residential house. It is further stated that the AO had deputed an Income-Tax Officer to make an enquiry with regard to the flats purchased by the assessee, and he in his report had provided that the flats are located in Block-A, on two different floors, and on two different ends, thereby meaning that the residential spaces cannot be converted into a duplex unit and cannot be used as a single dwelling unit. 18. It was contended that the exemption under Section 54F of the Act was specifically intended to incentivize investment in a single residential house upon the sale of a long-term capital asset other than a residential property. The provision's language, as well as judicial interpretations, support a restrictive reading of 'a residential house', which should be limited to one distinct residential property. In this regard, reliance was also placed on the decision rendered by the High Court o....
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....respect of the original asset, so much of the capital gain as bears to the whole of the capital gain the same proportion as the cost of the new asset bears to the net consideration, shall not be charged under section 45: Provided that nothing contained in this sub-section shall apply where- (a) the assessee,- (i) owns more than one residential house, other than the new asset, on the date of transfer of the original asset; or (ii) purchases any residential house, other than the new asset, within a period of three years after the date of transfer of the original asset; or (iii) constructs any residential house, other than the new asset, within a period of three years after the date of transfer of the original asset; and (b) the income from such residential house, other than the one residential house owned on the date of transfer of the original asset, is chargeable under the head "Income from house property..." 23. A reading of Section 54F of the Act reveals the following: (i) Sub-section (1) refers to 'a residential house'. Thus, the words used are 'a' and 'house'. (ii) A residential house has been subsequently referred to as 'a new asset' in the provision. Thus, th....
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....said case, the Court was dealing with an appeal filed by the assessee, where the issue was whether there is any restriction on considering more than one residential unit or house for exemption purposes under Section 54F of the Act. The Court held that for the purpose of claiming exemption under Section 54F of the Act, multiple residential houses located in separate cities cannot be regarded as 'a residential house'. The relevant portion of the decision reads as under: "2. The assessee claimed exemption on capital gains on sale of flat on the ground of acquisition of two houses. The Assessing Officer set off the capital gain against one of the houses but held the claim not to be admissible against second house. However, the CIT(A) upheld the claim of the assessee relying upon decision of Bangalore Bench of the Tribunal in D. Anand Basapa v. ITO (2004) 91 ITD 53. The said view has been reversed by the Tribunal as follows:- "6. We have carefully considered the rival submissions in the light of the material placed before us. The facts in the present case are clear. The assessee is claiming exemption in respect of two independent residential houses situated at different locations; o....
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....o flats as one unit. From these observations of Hon'ble High Court, it is clear that while rendering the decision they have kept in mind that the purchase of two flats in the same building which were united for living of the assessee by making necessary modifications made the residential unit as one and, thus, that case could not be applied to the facts of the case of the assessee........." 3. We have heard learned counsel for the appellant. 4. As regards claim for exemption against acquisition of two houses under Section 54 of the Act, the same is not admissible in plain language of statute. In the judgment of Karnataka High Court in CIT v. D. Ananda Basappa [2009] 309 ITR 329 (Kar), referred to in the impugned order, exemption against purchase of two flats was allowed having regard to the finding that both the flats could be treated to be one house as both had been combined to make one residential unit. The said judgment, thus, proceeds on a different fact situation." 28. However, the learned counsel for the assessee relied on the decision in Gita Duggal (supra), to argue that multiple residential units, even if built vertically or through renovations, could still be con....
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....n into one cohesive dwelling, the flats in this case are physically and legally separate and cannot be combined. Accordingly, the decision in Gita Duggal (supra) is not applicable to the present case, as the essential factor of adjacency is absent. 30. The learned counsel for the assessee also relied on the decision of High Court of Karnataka in D. Ananda Basappa (supra), and the decision of High Court of Madras in Gumanmal Jain (supra). We note that in D. Ananda Basappa (supra), the two residential flats purchased by the assessee therein were adjacent to each other and the vendor had certified that necessary modifications had been done to the flats to make them as one residential apartment, and thus, the exemption in respect of the same was allowed under Section 54 of the Act. In Gumanmal Jain (supra), the flats, though located in several blocks/towers, were constructed on a piece of land which was originally owned by the assessee only. The said decisions are distinguishable on facts and not applicable to the present case. 31. The meaning and purport of the word 'a' used with the term 'residential house', as used in Section 54F of the Act, is also under question. In P. Ramanatha....
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....ia. Accordingly, sub-section (1) of section 54 of the Income-tax Act has been amended to provide that the rollover relief under the said section is available if the investment is made in one residential house situated in India. 20.4 Similarly, sub-section (1) of section 54F of the Income-tax Act has been amended to provide that the exemption is available if the investment is made in one residential house situated in India. 20.5 Applicability: - These amendments take effect from 1st April, 2015 and will accordingly apply in relation to assessment year 2015-16 and subsequent assessment years. 35. Thus, it appears from the above that the amendment to Section 54F of the Act was introduced to resolve any ambiguity, clarifying that 'a residential house' indeed meant 'one residential house' to ensure consistency with the initial legislative intent. It may also be interpreted in a manner that 'a residential house' under Section 54F of the Act was never meant to cover multiple residential units. Be that as it may, this Court is not venturing into the question, initially projected by the assessee, that whether the amendment to Section 54F of the Act was clarificatory or not. 36. In thi....